Beyond Bending Tell You How
Real estate is a complex industry with a lot of jargon that can be confusing for those who are new to it. One of the terms that you may come across when buying or selling a property is “subject to”. It is a term that is often used in contracts and can have a significant impact on the transaction. In this blog post, we will explore what subject to means in real estate, how it works, and what you need to know about it.
Subject to is a clause that is commonly used in real estate contracts. It refers to a condition that must be met before the sale of the property is completed. This condition can relate to a variety of things, such as the buyer obtaining financing, the seller completing certain repairs, or a property inspection being conducted. Essentially, the sale of the property is subject to this condition being met.
Examples of Subject To in Real Estate
Subject to can be used in a variety of ways in real estate contracts. Here are some examples:
| Example | Description |
|---|---|
| Subject to Financing | This condition means that the sale of the property is subject to the buyer obtaining financing. The buyer must be able to secure a mortgage or other financing before the sale can be completed. |
| Subject to Inspection | This condition means that the sale of the property is subject to a property inspection. The buyer has the right to conduct an inspection of the property to identify any issues or problems. If any issues are found, the sale may be subject to the seller making repairs or offering a credit to the buyer. |
| Subject to Appraisal | This condition means that the sale of the property is subject to an appraisal. The lender will hire an appraiser to determine the fair market value of the property. If the appraisal comes in lower than the sale price, the buyer may need to renegotiate the sale price or the sale may fall through. |
How Subject To Works
When a real estate contract includes a subject to clause, it means that the sale of the property is contingent on a specific condition being met. This condition must be met before the sale can be completed. If the condition is not met, the sale may be delayed or fall through entirely.
For example, if a contract includes a subject to financing clause, the buyer must secure financing before the sale can be completed. If the buyer is unable to obtain financing, the sale may be delayed or cancelled.
It is important to note that subject to clauses can be negotiated between the buyer and seller. Both parties must agree to the conditions before the contract is signed. If there is a disagreement about the conditions, the sale may not proceed.
Benefits of Using Subject To
Subject to clauses can be beneficial for both buyers and sellers. Here are some of the advantages:
- Buyer Protection: Subject to clauses can protect buyers by allowing them to back out of the sale if certain conditions are not met.
- Seller Flexibility: Subject to clauses can give sellers flexibility by allowing them to negotiate certain conditions or requirements.
- Reduced Risk: Subject to clauses can reduce the risk of the sale falling through by ensuring that certain conditions are met before the sale is completed.
Risks of Using Subject To
While subject to clauses can be beneficial, there are also risks associated with using them. Here are some of the potential downsides:
- Delays: If a subject to condition is not met, it can delay the sale of the property.
- Uncertainty: Subject to clauses can create uncertainty for both buyers and sellers. If the conditions are not met, it may be unclear whether the sale will proceed.
- Negotiation: Negotiating subject to clauses can be complex and may require legal assistance to ensure that both parties are protected.
Subject To vs. Contingent Upon
Subject to and contingent upon are two terms that are often used interchangeably in real estate. While they are similar, there are some differences between the two.
Subject to refers to a condition that must be met before the sale can be completed. Contingent upon refers to a condition that must be met in order for the contract to be binding. For example, a contract may be contingent upon the buyer obtaining financing. If the buyer is unable to obtain financing, the contract is not binding and the sale will not proceed.
Conclusion
Subject to is a clause that is commonly used in real estate contracts. It refers to a condition that must be met before the sale of the property can be completed. Subject to can be used in many ways, such as financing, inspection, or appraisal. Both buyers and sellers can benefit from subject to clauses, but there are also risks associated with them. Understanding subject to in real estate is important for anyone who is buying or selling a property.
